REG - Gfinity PLC - Disposal

GfinityAnnouncement

05/12/2023 07:15

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RNS Number : 6425V  Gfinity PLC  05 December 2023

For immediate release

5 December 2023

Gfinity PLC

("Gfinity" or the "Company")

Disposal

 

The Board of Gfinity plc (AIM:GFIN) announces that the Company has today
disposed of the remaining business and assets of its former Esports Solutions
Division ("Disposal").

Background

As previously announced in February 2023, given the inconsistent nature of
service delivery work, and also the high cost to the Company of delivering a
true end-to-end esports solution and the resources required to support clients
in their activations around the globe, Gfinity had decided to partner with a
US esports business to jointly deliver solutions on a profit-share basis and
no fixed cost and as a result, had decided to close the Gfinity Arena in
Fulham. Subsequently, on 6 June 2023, the Company announced that the Board had
decided to close down its Esports Solutions Division as the market for esports
remained soft and the directors saw limited profitable growth opportunities
and had further resolved to focus solely on the media division.

Disposal

Ingenuity Loop Limited ("Ingenuity Loop" or the "Buyer"), a newly formed
company owned by media investor Mike Luckwell,  has agreed to buy the
remaining business and assets of the Esports Solutions Division for an upfront
cash payment of £15,000 as a contribution to costs incurred by the Esports
Solutions Division since August 2023 (including transaction costs) and a 15%
equity interest in the Buyer. The Buyer has an option to buy Gfinity's 15%
interest in Ingenuity for £200,000 in cash at any time in the first 12 months
following completion of the sale. Neville Upton, Non-executive Chairman  of
the Company, has agreed to join Ingenuity Loop as Chief Executive and will not
receive a salary until Ingenuity Loop is profitable. In return, Neville Upton
will have an equity interest of approximately 41.65% in Ingenuity Loop on
completion.

Under the proposed terms of the Disposal, the Buyer will have the licence for
a transitionary period of up to four years to trade as "Gfinity Esports
Solutions" provided that the Buyer is not permitted to make any public
announcements using the Gfinity trading name and there are standard provisions
protecting Gfinity if in any way the Gfinity brand is brought into disrepute
by the Buyer.

 

The Disposal sale and purchase agreement includes standard drag and tag
provisions and warranties by Gfinity capped at the value of the consideration.

 

Related Party

As Neville Upton has an interest in the Buyer, the Disposal is a related party
transaction pursuant to Rule 13 of the AIM Rules for Companies. Accordingly,
the Independent Directors (being the Board other than Neville Upton) consider,
having consulted with the Company's nominated adviser, that the Disposal is
fair and reasonable insofar as Gfinity's Shareholders are concerned. In
particular, the Independent Directors have taken into account that:

 

-      Since June 2023, the Esports Solutions Division has been closed
down and all the employees bar-one have been made redundant. The liability in
respect of the remaining employee is being transferred to the Buyer and there
is the potential for a cash consideration of £200,000 on exercise of the call
option by the Buyer;

-      Following the cessation of the Formula 1 contract, Gfinity does
not have available cash, internal expertise, or shareholder support to
re-generate the Esports Solutions Division;

-      In the current financial year ending 30 June 2024, the Esports
Solutions Division revenue is currently expected to be £nil; and

-      There are no other potential purchasers of the Esports Solutions
Division and in the absence of the sale, Gfinity would not receive any value
for the Esports Solutions Division.

 

Further AIM Disclosures

The Esports Solutions Division was formerly operated as a division within
Gfinity and not as a separate legal and accounting entity. Accordingly, there
are no standalone accounts for the business and the following has been
extracted from the Company's internal management accounts. In the last
published audited accounts for the year ended 30 June 2022, the Esports
Solutions Division turnover amounted to £2.0 million and the gross margin
amounted to £0.9 million, which was however, substantially accounted for by
the Formula 1 contract and which ended in March 2023. In the period since
closure in June 2023, turnover has been £nil and the remainder of the Esports
Solutions Division has been loss making. As at 31 December 2022, the Esports
Solutions Division's unaudited total assets amounted to £0.10 million and
£nil as at 30 June 2023 following closure of the division and release of the
Gfinity Arena in Fulham.

 

The Esports Solutions Division has one employee.

 

The initial cash consideration and in due course any proceeds on exercise of
the call option by the Buyer will be used for general working capital.

 

Other Information

Further information is available from the Company's website which details the
company's project portfolio as well as a copy of this announcement:
www.gfinityplc.com (http://www.gfinityplc.com)

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018 ("UK MAR").

 

The person who arranged for the release of this announcement on behalf of the
Company was David Halley, Chief Executive.

 

Enquiries:

 Gfinity Plc                    David Halley      ir@gfinity.net

 Beaumont Cornish Limited       Roland Cornish    +44 (0)207 628 3369

 Nominated Adviser and Broker   Michael Cornish   www.beaumontcornish.co.uk (http://www.beaumontcornish.co.uk/)

 

 

ENDS

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